Correlation Between Aggressive Growth and Consumer Finance
Can any of the company-specific risk be diversified away by investing in both Aggressive Growth and Consumer Finance at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aggressive Growth and Consumer Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aggressive Growth Allocation and Consumer Finance Portfolio, you can compare the effects of market volatilities on Aggressive Growth and Consumer Finance and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aggressive Growth with a short position of Consumer Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Growth and Consumer Finance.
Diversification Opportunities for Aggressive Growth and Consumer Finance
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aggressive and Consumer is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Allocation and Consumer Finance Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Finance Por and Aggressive Growth is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aggressive Growth Allocation are associated (or correlated) with Consumer Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Finance Por has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and Consumer Finance go up and down completely randomly.
Pair Corralation between Aggressive Growth and Consumer Finance
Assuming the 90 days horizon Aggressive Growth is expected to generate 2.7 times less return on investment than Consumer Finance. But when comparing it to its historical volatility, Aggressive Growth Allocation is 1.67 times less risky than Consumer Finance. It trades about 0.1 of its potential returns per unit of risk. Consumer Finance Portfolio is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,580 in Consumer Finance Portfolio on August 26, 2024 and sell it today you would earn a total of 405.00 from holding Consumer Finance Portfolio or generate 25.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Growth Allocation vs. Consumer Finance Portfolio
Performance |
| Timeline |
| Aggressive Growth |
| Consumer Finance Por |
Aggressive Growth and Consumer Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Growth and Consumer Finance
The main advantage of trading using opposite Aggressive Growth and Consumer Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Growth position performs unexpectedly, Consumer Finance can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Consumer Finance will offset losses from the drop in Consumer Finance's long position.| Aggressive Growth vs. Fidelity Asset Manager | Aggressive Growth vs. Fidelity Asset Manager | Aggressive Growth vs. Fidelity Asset Manager | Aggressive Growth vs. Fidelity International Capital |
| Consumer Finance vs. Banking Portfolio Banking | Consumer Finance vs. Insurance Portfolio Insurance | Consumer Finance vs. Financial Services Portfolio | Consumer Finance vs. Automotive Portfolio Automotive |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |